COMMITMENTS AND OFF BALANCE-SHEET RISK |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND OFF BALANCE-SHEET RISK [Abstract] | |||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND OFF BALANCE-SHEET RISK |
NOTE 17 – COMMITMENTS AND OFF BALANCE-SHEET RISK
Some financial instruments are used to meet customer financing needs and to reduce exposure to interest rate changes. These financial instruments include
commitments to extend credit and standby letters of credit. These involve, to varying degrees, credit and interest rate risk in excess of the amount reported in the financial statements.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment, and generally
have fixed expiration dates. Standby letters of credit are conditional commitments to guarantee a customer’s performance to a third party. Exposure to credit loss if the other party does not perform is represented by the contractual amount
for commitments to extend credit and standby letters of credit. Collateral or other security is normally not obtained for these financial instruments prior to their use and many of the commitments are expected to expire without being used.
A summary of the contractual amounts of financial instruments with off-balance-sheet risk was as follows at year-end (dollars in thousands):
The notional
amount of commitments to fund mortgage loans to be sold into the secondary market was $0 and approximately $1.3 million at December 31, 2022 and 2021, respectively.
The Bank enters into commitments to sell mortgage backed securities, which it later buys back in order to hedge its exposure to interest rate risk in its
mortgage pipeline. These commitments were $0 and approximately $9.5 million at December 31, 2022 and 2021, respectively.
At year-end 2022 approximately 72.0% of the
Bank’s commitments to make loans were at fixed rates, offered at current market rates. The remainder of the commitments to make loans were at variable rates tied to SOFR and the prime rate and generally expire within 30 days. The majority of the unused lines of credit were at variable rates tied to SOFR and the prime rate.
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